California PATHWAYS: GHG Scenario Results

Updated Results April 6, 2015

Amber Mahone, Elaine Hart, Ben Haley, Jim Williams, Sam Borgeson, Nancy Ryan, Snuller Price

2

Agenda

Overview of California PATHWAYS

Scenario results

2030 greenhouse gas emissions

Commonalities across scenarios

Forks in the road

Costs impacts of the energy transformation

3

About the California state agencies PATHWAYS project

Purpose

To evaluate the feasibility and cost of a range of greenhouse gas reduction scenarios in California

Project sponsors

Collaboration between CARB, CAISO, CPUC, CEC

Additional funding provided by the Energy Foundation

Team

Energy & Environmental Economics with support from LBNL

4

PATHWAYS: modeling approach

PATHWAYS is a California-wide, economy-wide infrastructure-based GHG and cost analysis tool

Adoption rates of technologies are defined by user, stock turn-over rates are based on lifetime of equipment

Energy & infrastructure costs are tracked

Not a macroeconomic model, costs & technologies are not endogenously defined, not an optimization model

Bottom up forecast of energy demand by end use, driven by:

Population, residential & commercial square footage, space heating/cooling, water heating, lighting, etc.

Hourly electricity demand & supply detail simulates planning, system operations, and cost

5

Key conclusions

GHG reductions of 26 38% below 1990 levels (319 268 MMTCO2e) appears achievable in 2030 with significant increase in GHG reduction efforts, mitigation of key risks

2030 straight line scenario ranges from net savings of $4B to net cost of $11B (in real 2012$)

Critical to success of long-term GHG goals:

1. Significant increase in energy efficiency and conservation in buildings, vehicles & industry

2. Fuel-switching away from fossil fuels in buildings & vehicles

3. Sustained pace of low-carbon electricity development (~50% renewables in 2030 in CA)

4. Decarbonize liquid or gas fossil fuels with sustainable biofuels and/or synthetic decarbonized fuels

5. Reductions of non-energy GHGs (methane & F-gases) More data are needed on forestry & land-use GHG emissions

6

Key scenario assumptions

Continuation of current lifestyle & growth of economic activity

Technological conservativism, plus key emerging technologies

Natural retirement of equipment (not early replacement)

Biomass use is limited based on DOE estimate of sustainable supply

Advanced biofuels are assumed to have net-zero carbon emissions

Electricity planning and operational assumptions maintain hourly balance of electricity supply & demand

7

Multiple scenarios are on a consistent trajectory to meet 2050 GHG goal

2050 goal: 80% below 1990

8

A range of potential targets in 2030 are consistent with 2050 goals

Initial scenarios achieve a 26% 38% reduction in GHGs by 2030, relative to 1990 GHG levels (34% - 45% below 2005 levels)

Slower

Straight Line

Faster

289

268

319

33%

38%

26%

MMtCO2 Per year

Reduction relative to

1990

Reference

Decarbonizing CAs economy depends on four energy transitions

1. Efficiency and

Conservation

3. Decarbonize

electricity

2. Fuel

Switching

4. Decarbonize

fuels (liquid & gas)

Energy use per capita

(MMBtu/person)

Share of electricity &

H2 in total final energy

(%)

Emissions intensity

(tCO2e/MWh)

Emissions intensity

(tCO2/EJ)

CCS

9

1. Doubling of current energy efficiency goals & reduced vehicle miles traveled

Energy use per capita

(MMBtu/person)

10

Higher Efficiency in Buildings & Industry

Approximate doubling of current plans for EE savings

Largest EE savings assumed to come from commercial LED lighting, more efficient equipment & appliances

Higher Efficiency of Vehicles and Reduced Demand for Transportation Services

8% reduction in vehicles miles traveled through smart growth policies and demographic trends by 2030

Sustained vehicle efficiency improvements

Petroleum refining and oil & gas extraction energy use decline proportionally with demand for liquid fossil fuels

2. Greater reliance on electricity in buildings & zero emission vehicles

11

Switching to electric space conditioning & water heating in buildings

Electric processes in industry

Rapid ramp up of battery electric and/or fuel cell vehicles

Share of New Vehicle Sales by Year and Technology

6-7 million ZEVs and PHEVs on the road by 2030

3. Renewables account for 50-60% of annual energy use by 2030

CCS

12

Average renewable additions are ~2,400 MW/year (plus rooftop PV) through 2030, mostly solar and wind resources.

Annual Energy 2030 Renewable Generation by Type (%) Straight Line

Integration solutions are needed in all high renewables cases:

regional coordination, renewable diversity, flexible loads, more flexible thermal fleet, curtailment energy storage, flexible fuel production for ZEVs

20% 50% 60%

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4. Limits to sustainable biomass: insufficient to replace both liquid and gaseous fuels

Biofuels used for liquid transportation fuels

Biofuels used in gaseous form in buildings & industry

Biogas

Renewable Diesel

Low Carbon Gas Scenario Straight Line Scenario

Share of Final Energy Demand by Fuel Type: 2030

5. Reduction in non-energy, non-CO2 GHGs

Mitigation potential is high for F-gases, methane leaks and some types of waste & manure. Difficult to mitigate cement, enteric fermentation, other agricultural non-energy GHG emissions. Places higher burden on mitigating energy GHGs.

Notes: Does not include land-use GHGs; Emissions inventory accounting protocol changed between 6th and 7th edition, resulting in higher estimate of historical non-energy GHG emissions.

Straight line scenario non-energy GHGs are above 1990 levels in 2030

Additional burden on energy sector GHG reductions

14

Two forks in the road

Zero Emissions Vehicles

New Infrastructure

Biomass Utilization

Building Electrification

1. Fuel production for ZEVs impacts electric grid needs

Flexible production of hydrogen fuels using 9,000 MW of grid electrolysis can balance 50% renewables, eliminating need for other storage (straight line)

Without flexible hydrogen fuel production, ~5,000 MW of long-duration energy storage is needed at 50% renewables in 2030 (high BEV scenario)

If biomass is used for liquid transportation fuels, over 50% of new sales of space conditioning & water heating are electric in 2030 (straight line)

If biomass is used to produce biogas to replace over 50% of natural gas use in buildings & industry in 2030, no electrification in buildings and industry is needed (low carbon gas scenario)

2. Use of biofuels impacts need to electrify buildings

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WHAT ARE THE COST IMPACTS?

How does PATHWAYS measure costs?

Included:

Incremental cost of energy infrastructure

Transportation: light-, medium- & heavy duty vehicles

Building & end uses: lighting, hot water heaters, space heaters, air conditioners, washer/dryer, etc.

Industrial equipment: boilers, motors, etc.

Electricity production: revenue requirement of all electric assets

Fuel & avoided fuel cost

Electricity, hydrogen, gasoline, diesel, natural gas, biofuel

Excluded:

Societal cost impacts

Climate benefits of GHG mitigation

Health benefits of reduced criteria pollutants

Structural/macroeconomic impacts

Changes in the costs of goods and services, jobs, structural changes to economy

Note: All costs are reported in real, levelized 2012 dollars

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-$40

-$20

$0

$20

$40

$60

$80

$100

$120

DelayedDeployment

StraightLine

EarlyDeployment

Incr

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(bill

ion

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$(10)

$(5)

$-

$5

$10

$15

$20

$25

$30

DelayedDeployment

StraightLine

EarlyDeployment

Incr

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(bill

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$)

Cost impacts of timing decisions

2030 scenarios & sensitivities span savings of $8B to costs of $23B/year

2030 Straight Line scenario equivalent to $50/yr/capita total net cost

Delaying deployment of some high cost measures until post-2030 reduces cost in near-term, but may increase cost in long-run; Early deployment increases near-term costs (but reduces criteria pollutants)

Error bars represent high & low cost sensitivity analysis

2030 2050

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Average Household Monthly Cost: 2030 Straight Line Scenario

Average household sees significant savings in gasoline/diesel costs, offset by increases in electric bill, car payments and cost of ZEV fuel (doesn't include changes to cost of goods & services)

Net Total: $8/mo/household 0.8% increase over Reference Scenario energy-related costs ($14/mo/household if assume all com. & industrial energy system costs flow through to households)

Thank You!

Energy and Environmental Economics, Inc. (E3)

101 Montgomery Street, Suite 1600

San Francisco, CA 94104

Tel 415-391-5100

www.ethree.com

APPENDIX

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PATHWAYS: Model framework

Energy Demand Energy Supply Model outputs

Residential Commercial Industrial Refining Oil & gas

extraction Transportation Agriculture Water-related

energy demand

Electricity Pipeline gas Diesel + biofuels Gasoline +

biofuels Refinery &

process gas Coke Waste heat

GHG emissions Final energy

demand Energy system

costs Electricity

dispatch metrics Appliance,

building, vehicle stock numbers

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Key Scenario Assumptions

Continuation of current lifestyle & growth of economic activity

Technological conservativism with key emerging technologies

Use commercial, or near-commercial technologies with conservative cost and performance assumptions. Key emerging technologies in include: advanced biofuels, decarbonized gas, electrolysis, long-duration energy storage, and CCS.

Natural retirement of equipment (not early replacement)

Limitations on use of biomass

Based on DOE estimate of sustainable U.S.-based supply of biomass

Advanced biofuels are assumed to have net-zero carbon emissions

Electricity planning and operational heuristics

Hourly demand derived from flexible end use loads; resources built to RPS requirement and planning reserve margin requirement; hourly supply simulated; import/export capability, & operational heuristics benchmarked to production simulation and historical data; all renewables are assumed to be balanced with in-state resources

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PATHWAYS was developed to provide a high-level assessment of economy-wide greenhouse gas emissions and costs; Although the model includes detailed data that went into the calculation of the GHGs and costs, this data should not be used outside the context of economy-wide GHG analysis. In particular:

The tool does not calculate macroeconomic impacts or predict how technology or fuel prices may drive adoption of a particular technology or practice

The tool should not be used for electric generation resource adequacy calculations, or to calculate flexible electric generation resource capacity needs, including energy storage needs. PATHWAYS should not be used in place of an electricity resource planning tool.

Disclaimer on Using PATHWAYS Data

WHAT IS AN ACHIEVABLE 2030 GHG GOAL?

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1. Reference current GHG policies

Timing Scenarios (achieve 80% below 1990 by 2050)

2. Straight Line distinguished by high renewable energy, fuel cell and battery electric

vehicles, energy efficiency and electrification

3. Early Deployment similar to Straight Line scenario but with more focus on near-term

air quality & GHG actions

4. Slower Commercial

Adoption

delay some higher-cost measures in commercial and trucking until

post-2030, accelerate adoption post-2030 to hit 2050 goal

Alternate Technology Scenarios (achieve 80% below 1990 by 2050)

5. Low Carbon Gas no building electrification, decarbonized pipeline gas

6. Distributed Energy achieves zero-net energy building goals w/ DG PV and grid storage

7. CCS phase-in of CCGTs with CCS post-2030

8. High BEV no fuel cell vehicles, focus on BEVs

Scenarios evaluate GHG reduction timing and energy pathways to 2030 and 2050

27

Summary of Timing Scenarios: Key Input Assumptions in 2030

Slower Commercial

Adoption Scenario

Straight Line Scenario Early Deployment Scenario

Electricity 50% qualifying renewables in 2030 50% qualifying renewables in 2030 60% qualifying renewables in 2030

Biomass &

Biofuels

Ramp up of renewable diesel is

delayed until after 2030 Significant imported renewable diesel Same as Straight Line Scenario

Electricity

balancing

services

Same as Straight Line Scenario

Mix of 2 to 8 hour battery storage, flexible

loads and smart charging of EVs. Increasing

reliance on grid electrolysis for H2

production after 2030.

Same as Straight Line Scenario

plus additional pumped hydro in 2020

timeframe.

End-uses and fuel choices

Buildings

Commercial electric heat pump

adoption is postponed until 2030, then

sees faster adoption post-2030.

Residential buildings are unchanged

from Straight Line scenario.

Significant energy efficiency though out,

electric heat pump HVAC & water heating

large part of new appliance sales starting in

2020, no early replacement of equipment.

Electric heat pumps for nearly all new sales

of hot water & HVAC in South Coast region

by 2030

Transportation

Postponed adoption of BEVs & FCVs

until 2030, faster adoption post-2030.

Faster adoption of LNG for HDVs &

CNG buses through 2030.

Significant increase in H2 fuel cell vehicles

(FCV) and electric vehicles + biodiesel

CNG & LNG for all new MDVs and HDVs in

South Coast, more rapid adoption of ZEVs

than Straight Line Scenario

Industry Delayed electrification of industrial end

uses until post-2030. Increase in energy efficiency, electrification Same as Straight Line Scenario

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Multiple scenarios are on a consistent trajectory to meet 2050 GHG goal

Initial scenarios achieve a 26% 38% reduction in GHGs by 2030, relative to 1990 GHG levels (34% - 45% below 2005 levels)

Delayed Deployment

0

100

200

300

400

500

600

1990 2000 2010 2020 2030 2040 2050

Cal

ifo

rnia

To

tal G

ree

nh

ou

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as

Emis

sio

ns

(MM

tCO

2e

/yr)

CCS

Reference

Early Deployment

Straight Line(Low Carbon Gas)

(High BEV)(Distributed Energy)

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A range of potential targets in 2030 are consistent with 2050 goals

Initial scenarios achieve a 26% 38% reduction in GHGs by 2030, relative to 1990 GHG levels (34% - 45% below 2005 levels)

Slower

Straight Line

Faster

289

268

319

33%

38%

26%

MMtCO2 Per year

Reduction relative to

1990

Reference

30

CA scenarios in 2025 are similar to U.S. administrations 2025 goal on a percent reduction basis, although CA has lower per capita GHG emissions.

Comparison of CA 2025 results with U.S. administration 2025 goal

Slower

Straight Line

Faster

8.3

8.0

8.6

28%

30%

25%

tCO2 per capita

Reduction relative to

2005

U.S. 2025 Goal 15.1-15.5 26-28%

KEY COMMONALITIES ACROSS SCENARIOS

Decarbonizing CAs economy depends on four energy transitions

1. Efficiency and

Conservation

3. Decarbonize

electricity

2. Fuel

Switching

4. Decarbonize

fuels (liquid & gas)

Energy use per capita

(MMBtu/person)

Share of electricity &

H2 in total final energy

(%)

Emissions intensity

(tCO2e/MWh)

Emissions intensity

(tCO2/EJ)

CCS

32

Decarbonizing CAs economy depends on four energy transitions

1. Efficiency and

Conservation

3. Decarbonize

electricity

2. Fuel

Switching

4. Decarbonize

fuels (liquid & gas)

Energy use per capita

(MMBtu/person)

Share of electricity &

H2 in total final energy

(%)

Emissions intensity

(tCO2e/MWh)

Emissions intensity

(tCO2/EJ)

Common

strategies applied

across all

scenarios

Forks in the road:

1) Electrification

vs. biogas in

buildings

2) All-electric

vehicles vs.

fuel cell

Common

strategies applied

across all

scenarios

(except CCS

scenario)

Forks in the road:

1) Liquid biofuels

in vehicles vs.

biogas &

synthetic gas

in buildings

33

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Energy Efficiency Electricity

Electric energy efficiency is nearly double in the straight line scenario compared to current policy, mostly due to LED lighting and more efficient appliances

Electric Efficiency (GWh) Fuel switching from natural gas appliances to high efficiency electric heat pumps (not shown at right) achieves additional EE in the Straight line scenario; increases electric loads

Natural gas efficiency also increases through 2030; but in the straight line scenario it falls post-2030 due to fuel switching to electricity

35

Energy Efficiency by End Use

Conventional energy efficiency savings are driven by residential & commercial lighting, HVAC and commercial plug-loads and appliances, additional efficiency from fuel-switching to heat pumps are not shown

Natural gas efficiency is driven by water heating, space heating and agriculture and industrial measures

36

Energy Efficiency & Smart Growth in Transportation

Significant reduction in vehicle-miles-traveled (VMT) & transportation energy demand in all compliant scenarios

Vehicle Miles Traveled

Transportation Energy Demand

37

Increase in Building Electrification

Residential Electrification: 2030 Commercial Electrification: 2030

Transition toward electric heat pumps in buildings in Compliant Scenarios begins in 2020

Early deployment scenario assumes all new building space heating and water heating in the South Coast is electric starting in 2020

38

Light duty fuel cell vehicles (FCV), battery electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV) as % of new vehicle sales in 2025 and 2030

Light Duty Vehicles ZEV & PHEV Market Share of New Sales (%) by Year

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Light Duty Vehicles Number (#) of ZEVs & PHEVs in Fleet by Year

Number of light duty fuel cell vehicles (FCV), battery electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV) on the road in CA in 2025 and 2030

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Number of medium and heavy duty zero-emission vehicles

Heavy & Medium Duty Vehicles # ZEVs & hybrids in Fleet by Year

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All scenarios except CCS rely on renewables to decarbonize electricity

Straight line scenario targets 50% renewables in 2030

75 86 % renewables in 2050, except for CCS scenario

Renewable capacity needs increase dramatically post-2030 due to higher electric loads and higher renewable goals

Note: In-state and out-of-state renewable development is assumed, including new transmission to deliver renewable resources.

Integration solutions needed:

Hydro & thermal generation

Renewable diversity, regional coordination, renewable curtailment

Increased reliance on flexible loads, especially flexible fuel production (grid electrolysis) in scenarios with fuel cell vehicles

4-8hr stationary storage is needed in high BEV scenario due to no flexible grid electrolysis

Renewable Capacity (MW)

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Electricity generation increases significantly due to fuel switching

Low-carbon electricity is primarily provided by solar and wind resources, natural gas generation continues to provide energy when solar and wind are not available

Electric loads increase significantly between 2030 2050 due to fuel switching in buildings, industry & transportation

Generating capacity by fuel type Annual Generation by fuel type

43

CCS Scenario

Meets capacity needs post-2030 with dispatchable natural gas CCGT with CCS, limited new renewables

Lower total demand because natural gas reformation with CCS replaces grid electrolysis to produce hydrogen

Capacity (MW) Energy (TWh)

44

CCS Scenario

Key Results:

CCS runs at high capacity factor, reducing capacity build of renewables

CCS is higher risk strategy since technology is not yet commercialized but opportunity for cost savings

45

Distributed Energy Scenario

Meets zero net energy goal (ZNE) by 2020 for new residential & ZNE by 2030 for all new commercial

46

Distributed Energy Scenario

Rooftop PV vs. ground-mounted PV is not a critical GHG policy decision

High DG scenario is not very different than straight line scenario in terms of GHG and cost metrics

Key questions in this scenario are who pays for the rooftop solar & cost uncertainty around upgrades to the grid.

47

California is assumed to import biofuels from U.S. resource

Compliant scenarios assume California imports population weighted share of U.S. sustainable biomass supply for biofuels

Biomass supply is assumed to increase over time, up to 75% of U.S. estimated resource potential, based on DOEs Billion Tons Study Update

Pipeline gas demand & emissions intensity varies with future policy & technology options

Pipeline gas demand (Mtherms/yr)

Pipeline gas emissions intensity (tCO2e/Quad)

Bi-modal scenarios evaluated on pipeline gas:

Enable a switch to low-carbon fuels and sustain gas distribution grid (i.e. through a renewable fuels standard for biogas and synthetic methane) or;

Enable electrification and phase out gas distribution grid

48

Liquid fuel demand falls in all scenarios, but emissions intensity depends on policy choices

Liquid fuel demand (Gallons gasoline equiv./yr)

Liquid fuel emissions intensity (tCO2e/billion GGE)

Low-emissions and zero-emissions vehicles are needed in all scenarios, dramatically reducing demand for liquid fossil fuels

If natural gas sector is decarbonized (low carbon gas scenario), then liquid fuel supply doesnt need low-carbon fuels through 2050, otherwise, large amounts of liquid biofuels are needed

49

Reduction in non-energy GHGs is essential, but mitigation measures are limited

Mitigation potential is high for F-gases, methane leaks and some types of waste & manure. Difficult to mitigate cement, enteric fermentation, other agricultural non-energy GHG emissions. (Does not include Forestry/lands GHGs due to data limitations)

Note: Emissions inventory accounting protocol changed between 6th and 7th edition, resulting in higher estimate of historical non-energy GHG emissions.

Straight line scenario non-energy GHGs are above 1990 levels in 2030

Additional burden on energy sector GHG reductions

50

51

Sensitivities in Straight Line scenario reveal consequences of failure or achievement in 2030

?

Ex: ZEVs in 2030 contribute ~16 MMTCO2 reductions, given electricity portfolio

51

52

Sensitivities in 2050 show relative importance of carbon reduction strategies in long-term

?

52

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2030 GHG Ranges Across Potential Strategies

GHGs in compliant strategies range from 26% - 38% below 1990 levels by 2030 (i.e. 34% - 45% below 2005 levels by 2030)

319 MMtCO2 289

268

-38% -33%

-26%

1990 Levels 2030 Statewide GHGs

WHAT ARE THE COST IMPACTS?

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Other studies attempt to quantify the costs of climate change

Other studies have shown that the costs and risks of climate change exceed expected investment cost in low-carbon solutions

PATHWAYS does NOT evaluate whether carbon mitigation is cost-effective relative to the costs of climate change

PATHWAYS evaluates trade-offs between carbon mitigation pathways & investment need in low-carbon solutions

Source: Risky Business: The Economic Risks of Climate Change in the United States, June 2014.

How does PATHWAYS measure costs?

Included:

Incremental cost of energy infrastructure

Transportation: light-, medium- & heavy duty vehicles

Building & end uses: lighting, hot water heaters, space heaters, air conditioners, washer/dryer, etc.

Industrial equipment: boilers, motors, etc.

Electricity production: revenue requirement of all electric assets

Fuel & avoided fuel cost

Electricity, hydrogen, gasoline, diesel, natural gas, biofuel

Excluded:

Societal cost impacts

Climate benefits of GHG mitigation

Health benefits of reduced criteria pollutants

Structural/macroeconomic impacts

Changes in the costs of goods and services, jobs, structural changes to economy

Note: All costs are reported in real, levelized 2012 dollars

56

Cost sensitivities are asymmetric; focus on technology, fuels & financing costs

Key uncertainties Low cost sensitivity

High cost sensitivity

Technologies

Solar PV -50%

Electric heat pumps -20%

LED lighting -20%

Grid electrolysis -20%

Wind power -5%

Fuel Cell Vehicles -5%

Battery Electric Vehicles & PHEVs -5%

Electric boilers -5%

Biofuels High cost

Fossil fuel prices +50% -50%

Financing cost 5% (real) 10% (real)

Technology costs are not modified in the high cost sensitivity because base cost assumptions are already conservative. All cost sensitivities modify both the Reference and Straight Line scenario assumptions.

57

Fuel price sensitivities

58

Fossil and renewable fuel prices projections range from high to low, reflecting future price uncertainties

Cost impacts of timing decisions

2030 scenarios & sensitivities span savings of $8B to costs of $24B/year

2030 Straight Line scenario equivalent to $50/yr/capita total net cost

Delaying deployment of some high cost measures until post-2030 reduces cost in near-term, but may increase cost in long-run; Early deployment increases near-term costs (but reduces criteria pollutants)

Error bars represent high & low cost sensitivity analysis

2030 2050

59

60

Average Household Monthly Cost: 2030 Straight Line Scenario

Average household sees significant savings in gasoline/diesel costs, offset by increases in electric bill, car payments and cost of ZEV fuel (doesn't include changes to cost of goods & services)

Net Total: $8/mo/household 0.8% increase over Reference Scenario energy-related costs ($12/mo/household if assume all com. & industrial energy system costs flow through to households)

61

Average Commercial Monthly $/sq ft: 2030 Straight Line Scenario

Average commercial enterprise sees significant savings in gasoline/diesel costs, offset by increases in other costs.

Net Total: $10/mo/1,000 sf 1.7% increase over Reference Scenario energy-related costs

62

Total cost /Household (including change in goods and services costs) Monthly Cost: 2030 Straight Line Scenario

Total costs/# households: average household sees savings in gasoline/diesel costs, offset by increases in electric bill, ZEV costs and increases in the cost of goods & services

Net Total: $14/mo/household 0.7% increase over Reference Scenario energy-related costs

*Assumes all cost impacts on commercial and industrial sectors flow through to California households

63

Average Trucking & Buses Monthly $/vehicle: 2030 Straight Line Scenario

Medium & heavy duty trucks & buses low-carbon alternatives are expected to be costly relative to current technologies.

Net Total: $26/mo/vehicle 1.7% increase over Reference Scenario energy-related costs

64

Average Industrial Cost % of MFG output: 2030 Straight Line Scenario

2030 average industrial costs are relatively modest. Higher electricity bills are due largely to higher cost of electricity rather than electrification

Net Total: 0.4% of MFG output 2.4% increase over Reference Scenario energy-related costs

Key Uncertainties Affecting Reference & All Scenarios

Climate change (warmer summers, colder winters and less hydro availability) and unexpected increases population growth represent two uncertainties that would increase the cost of all future scenarios, including the Reference scenario

These uncertainties have little impact on net costs or GHGs relative to Reference scenario, but large impact on total costs and GHGS

65

FORKS IN THE ROAD

67

How to use limited supply of biofuels?

Biomass supply is limited: assume CA imports population-share (12%) of U.S. total supply (61-69 million bone dry tons in 2030)

Current policy directs biomass into liquid fuels (Straight Line scenario assumptions); Alternate pathway could direct biomass into biogas (Low carbon gas scenario assumptions); or a blend of different biofuels options (not tested here)

Final Energy Demand by Major Fuel Type

Biogas

Renewable Diesel

Reference total

Straight Line Low Carbon Gas

68

Low Carbon Gas

By 2030: Biogas serves 53% of natural gas demand; no building electrification

Straight Line

By 2030: Biomass serves 24% of liquid fuels; 60% of new water heaters, 50% of new residential space heaters are electric

Biofuel pathways require different low-carbon strategies in buildings

Produce biogas for buildings & industry

Electrify new sales of water and space heating

No building electrification

Biomass Utilization

Building Electrification

Use renewable liquid fuels for transport.

OR (new appliance sales)

69

High BEV

By 2030: New sales are 57% PHEV/BEVs; Energy storage balances renewables

Straight Line

By 2030: New sales are 29% PHEV/BEVs, 27% FCVs; Flexible electrolysis balances renewables (assuming 25% load factor)

ZEV pathways require different electricity infrastructure

Focus on BEVs if FCVs dont materialize

Electric vehicle charging load: 7,000 MW

Zero Emissions Vehicles

New Infrastructure

Mix of fuels cell (FCVs) and battery electric vehicles (BEVs)

OR

Flexible grid electrolysis: 9,000 MW

Electric vehicle charging load: 20,000 MW

New 4-8 hr energy storage: 5,000 MW

No new energy storage

No grid electrolysis No H2 fueling stations

H2 fueling stations

(new vehicle sales)

-5

0

5

10

15

20

25

StraightLine

High BEV Low carbongas

Incr

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tal C

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ce

(bill

ion

$)

Cost implications of forks in the road

Low Carbon Gas scenario vs. Straight Line scenario costs are driven by assumptions about biofuel availability and cost (very uncertain)

Cost differences between Straight Line and High BEV scenario are minor and are driven by cost assumptions for FCVs vs. BEVs

Error bars represent high & low cost sensitivity analysis

2030 2050

70

71

Technology commercialization risks vary by scenario

Technology Risk

(combines importance and degree of commercialization)

Technology Category Straight Line High BEV Low Carbon Gas

Availability of low-carbon, sustainably-sourced biomass High High High

Hydrogen production using renewable electrolysis High n/a High

Fuel cells in light-duty & heavy duty vehicles High n/a High

Production of low-carbon, drop-in liquid biofuels High High n/a

New long duration grid storage n/a High n/a

Production of low-carbon biogas n/a n/a High

Production of synthetic low-carbon gas n/a n/a High

High efficiency heat pumps Medium Medium n/a

Electrification of industrial end uses Medium Medium n/a

Light duty & heavy duty electric vehicles Medium Medium Medium

LED lighting Low Low Low

Energy efficiency in vehicles Low Low Low

ELECTRICITY SECTOR DETAILS

73

Electricity Balancing - 2015

In near-term, renewables balanced largely by natural gas and hydro

Winter Summer

74

Electricity Balancing 2030 in Straight line Scenario

Additional renewables built for and absorbed by flexible grid electrolysis to fuel FCVs

Winter Summer Grid

Electrolysis

75

Electricity Balancing 2030 in High BEV Scenario

Lower loads, some balancing provided by workplace charging, additional balancing required from storage

Winter Summer Workplace charging

Energy storage

76

Renewable Curtailment (% of available renewable energy)

Integration solutions are needed in all high renewable scenarios

0.7% 0.8% 1.9%

In all renewable scenarios:

Continued role for hydro & thermal generation

Renewable diversity, regional coordination, renewable curtailment

Increased reliance on flexible loads, especially flexible fuel production (grid electrolysis)

More 4-8hr stationary storage is needed in high BEV scenario due to no flexible grid electrolysis

Thermal Generation

Hydropower

Energy Storage

Imports/ Exports

Flexible Loads

Flexible Electrolysis

*Storage balancing capability = charging + discharging capacity

77

Renewable curtailment relatively low in all scenarios due to integration solutions

Straight Line scenario assumes grid electrolysis (producing hydrogen for fuel cell vehicles) will provide grid balancing services. With no fuel cell vehicles or grid electrolysis, renewable curtailment and/or dedicated electricity energy storage needs increase substantially.

Important Note: Storage needed for integration and system-wide renewable curtailment are highly sensitive to input assumptions in PATHWAYS. Additional integration studies would be needed to precisely determine adequate storage capacity for each PATHWAYS scenario

Renewable curtailment (%)

78

Electricity Costs by Scenario

Average cost of electricity generation (revenue requirement divided by total generation) increase in Compliant Scenarios relative to Reference scenario.

Increases in reference case cost assumptions are driven by assumptions about business-as-usual escalation rates of existing generation, transmission & distribution costs.

Average electricity cost ($/kWh) Electric Revenue Requirement (Billions$)

KEY INPUT ASSUMPTIONS

80

Vehicle Costs

LDV - Autos

HDVs

MDVs

Buses

81

Vehicle Costs - Low Cost Sensitivity

LDV - Autos

HDVs

MDVs

Buses

82

Vehicle Efficiency

LDV - Autos

HDVs

MDVs

Buses

83

LEDs Cost and Efficiency

84

Heat Pump Water Heaters - Costs

85

Grid Electrolysis and Batteries - Costs

86

Base cost assumptions for new renewables

All-in capital cost ($/kW 2012$) 2015 2030 2050

% reduction from 2015 by 2050

% reduction from 2050 cost

in low cost sensitivity

Biogas - Distributed $ 9,700 $ 9,700 $ 9,700 0% 0%

Biomass - Distributed $ 6,000 $ 6,000 $ 6,000 0% 0%

Biomass - Large $ 5,600 $ 5,600 $ 5,600 0% 0%

Geothermal $ 5,522 $ 5,522 $ 5,522 0% 0%

Hydro - Small $ 3,960 $ 3,960 $ 3,960 0% 0%

Solar Thermal - No Storage $ 5,908 $ 5,217 $ 4,297 -27% -50%

Solar Thermal - Storage $ 8,074 $ 7,034 $ 5,584 -31% -50%

Utility PV - Res Roof $ 5,255 $ 4,445 $ 3,785 -28% -50%

Utility PV - Distributed $ 3,774 $ 3,193 $ 2,719 -28% -50%

Utility PV - Fixed Tilt - 1MW $ 3,822 $ 3,233 $ 2,753 -28% -50%

Utility PV - Fixed Tilt - 5MW $ 3,545 $ 2,999 $ 2,553 -28% -50%

Utility PV - Fixed Tilt - 10MW $ 3,258 $ 2,756 $ 2,347 -28% -50%

Utility PV - Fixed Tilt - 20MW+ $ 3,134 $ 2,651 $ 2,257 -28% -50%

Utility PV - Tracking - 1MW $ 4,000 $ 3,527 $ 3,088 -23% -50%

Utility PV - Tracking - 5MW $ 3,752 $ 3,308 $ 2,896 -23% -50%

Utility PV - Tracking - 10MW $ 3,485 $ 3,072 $ 2,690 -23% -50%

Utility PV - Tracking - 20MW+ $ 3,380 $ 2,980 $ 2,609 -23% -50%

Wind $ 2,341 $ 2,277 $ 2,190 -6% -5%

Wind - Distributed $ 2,890 $ 2,809 $ 2,703 -6% -5%

Renewable capital costs and trajectories through 2030 are based on Black & Veatch 2013 study of renewable capital costs used in CPUC RPS Calculator update, beyond 2030 B&Vs learning curves are applied

Thank You!

Energy and Environmental Economics, Inc. (E3)

101 Montgomery Street, Suite 1600

San Francisco, CA 94104

Tel 415-391-5100

www.ethree.com